Credit reports sum­mar­ize your payment history with creditors and are auto­matically generated by the three major credit bu­reaus: Equifax, Ex­perian and TransUnion. Freezing them prevents fraudsters from opening a new line of cred­it using your personal in­formation.

Data breaches may feel like an annoying fact of life, but the 2017 Equifax breach dramatically in­creased the likelihood that your personal information is out there, waiting to be misused.

“The Equifax data breach exposed the critical fi­nan­cial information of more than half of the Am­er­ic­an adult pop­u­lation,” says Chi Chi Wu, staff at­tor­ney at the Na­tion­al Consumer Law Cen­ter, a nonprofit ad­vo­cacy or­gan­ization. Data ex­posed in­cludes Social Sec­ur­ity num­bers, names, birth­dates, addresses and some driver’s licenses. If the Equifax breach or any others have put your in­for­mation in the hands of scam­mers, they could get a credit card or loan in your name, rack up debt and wreck your credit.

Why you should freeze your credit

Choosing to place a credit freeze — or not — boils down to how you think about your personal information being exposed. You could ignore it and hope nothing bad happens, or you could take action now to prevent damage.

In a world where data breaches are commonplace, freezes aren’t a luxury, they’re a necessity. As a millennial building your financial life, you’re better off protecting your credit as soon as possible.

Think of it as adding a deadbolt on your front door. You hope no one will be able to get through your existing lock, just as you hope personal data like your Social Security number stays private. But by adding the deadbolt, you have an extra layer of protection in case that first lock is picked.

How free credit freezes work

The process for placing a freeze differs slightly at each credit bureau, but you can do it online or over the phone. The freeze then blocks lenders from ac­cess­ing your credit re­ports. If a bad actor applies for credit in your name, the lender can’t see your reports to make a lending decision and won’t approve the ap­pli­cation.

When you want to apply for credit, you unfreeze one or more of your reports by log­ging in to your account. (Experian gives you a spe­cial PIN to unfreeze the re­port). “It’s something you can do with your phone even as you’re walking into your lender’s office,” says John Ulzheimer, a credit ex­pert who has worked at Equi­fax and credit scoring com­pany FICO. You can also designate a period of time to temporarily lift the freeze, such as when shop­ping for a mortgage, Wu says.

Your credit score — the three-digit number that is based on information in your credit reports — is not af­fect­­ed. (You can check your own credit reports with no consequences to your score, whether you have a freeze or not.)

Freezing and unfreezing your credit reports is now free, thanks to con­gress­ional action after the Equi­fax breach. Parents also have the right to have cred­it reports created for their minor children and freeze them for free, Ulz­heim­er says. Freezing your chil­dren’s credit helps pro­tect them from identity theft.

What a credit freeze does not do

Protect against some forms of identity theft. A freeze stops new credit from being opened, but if someone has the de­tails of your existing cred­it card, they could make fraudulent charges on it. If they have your So­cial Security number, they could file a fake tax re­turn or claim Social Sec­ur­ity benefits in your name. It’s still essential to mon­itor your credit card trans­actions and other financial accounts and to report any suspected identity theft immediately, Wu says.

Prevent existing cred­itors from seeing your re­ports. Lenders with which you already have a re­la­tionship can still see your credit reports. Debt col­lect­ors can also access them.

Stay vigilant

It’s a good idea to check your credit reports and credit score regularly so you can act quickly if you spot an anomaly.

Many personal finance web­sites, banks and credit card issuers offer a way to check your credit. Look for one that offers both credit score and credit report in­for­mation, updates rou­tine­ly and is free.

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